Aussie bonds rally as US Fed officials talk

Australian bond futures contract prices are firmer after two US Federal Reserve officials assured dealers that American interest rates would not rise straight away.

Ten-year bond yields had risen sharply since last week, hitting a 14-month high on Monday, after the US central bank indicated it could begin diluting its $US85 billion a month bond buying program, known as quantitative easing, by mid-2014.

But longer-dated Australian futures contract prices, in particular, began their recovery on Tuesday after Minneapolis Fed president Narayana Kocherlakota and his Dallas counterpart Richard Fisher made reassuring comments.

National Australia Bank head of research Peter Jolly said their indication that US interest rates would not rise immediately gave dealers a reason to buy government bonds again.

"There was some soothing comments, trying to make the case that the Federal Reserve is on a measured path, they don't want to see markets unruly, they've got their eye on the economy," he said.